AECOM reports second quarter fiscal 2025 results

• Increased fiscal 2025 financial guidance for the second time this year
• Delivered a strong quarter across all key financial metrics
• Adjusted EBITDA increased by 8% and adjusted EPS increased by 20%
• Backlog increased to a new record, driven by a 1.1x book-to-burn ratio
• Achieved new recognition as the #1 overall design firm as ranked by ENR, including reaffirmed #1 rankings in the transportation, water and facilities markets

AECOM (NYSE:ACM), the trusted global infrastructure leader, today reported second quarter fiscal 2025 results.

"Even with impacts resulting from changing political dynamics around the world, we continue to deliver on our financial and strategic objectives, just as we have over the past several years, and we are increasing our financial guidance for a second consecutive quarter as a result," said Troy Rudd, AECOM's chairman and chief executive officer. "Through our ongoing investments to extend our capabilities and expand our addressable market, we have created a competitive edge platform. This advantage was apparent in our selection as the Official Venue Infrastructure Partner for the LA28 Olympic and Paralympic Games, where our ability to deliver architecture, engineering, planning, construction management and program management services was the key differentiator. Importantly, the secular demand drivers of global infrastructure investment, energy, and sustainability and resilience continue to underpin our conviction in a multi-decade growth cycle that will power through any near-term volatility."

"We continue to win work at a record high rate, which resulted in quarter-over-quarter backlog growth to a record level and strong visibility in the second half of fiscal 2025 and beyond," said Lara Poloni, AECOM's president. "The technical expertise we bring to clients remains our greatest competitive advantage. The strength of this expertise was further validated by ENR's most recent rankings, in which we moved up one spot to become the number one design firm overall and maintained our number one rankings in the transportation, water and facilities markets. As a result, we are poised to lead as our markets continue to grow."

"As our increased guidance demonstrates, we have outperformed expectations year to date and have strong visibility created by our record backlog and pipeline position," said Gaurav Kapoor, AECOM's chief financial and operations officer. "We also further expanded our industry-leading margins, reflecting the benefits from our high-returning organic growth investments, growth in our highest-margin markets, and ongoing continuous improvement initiatives. As a result, we are well advanced on our 17%+ margin target and our confidence is increasing in further margin expansion beyond this target over time. Free cash flow also increased by 141% in the quarter and is up 80% fiscal year-to-date, which is a testament to the high earnings quality of the business and our strong culture of cash generation we consistently deliver."

Second Quarter Highlights

• Revenue declined by 4%; net service revenue² increased by 4%, highlighted by 6% growth in the Company's largest and most profitable region, the Americas.
  • Fewer workdays in the quarter resulted in an approximately 100 basis point headwind to year-over-year growth
• Operating income increased by 28%; both the segment adjusted¹ operating margin³ and the adjusted¹ EBITDA margin⁵ increased by 90 basis points to 16.1% and 16.3%, respectively, both of which set second quarter records.
• Net income increased by 38%; adjusted¹ EBITDA⁴ increased by 8% and adjusted¹ EPS increased by 20%.
• Free cash flow⁶ increased by 141%, and the Company returned $165 million to shareholders through repurchases and dividends in the first half of the year.
• Total backlog⁷ increased by 3% to a record high, driven by a 1.1x book-to-burn⁸ ratio in each of the Americas design and International design businesses, contributing to a 1.1x book-to-burn ratio enterprise wide.
  • Design backlog⁷ increased by 4% to a record high, highlighted by 5% contracted backlog growth and a 1.2x book-to-burn ratio in the U.S. design business.
  • Delivered an eighteenth consecutive quarter with a book-to-burn ratio in excess of 1.0.
  • The Company's pipeline of opportunities increased to a new record, including growth in both segments.

Financial Guidance

• AECOM increased its fiscal 2025 adjusted EBITDA and EPS guidance, and affirmed its expectation to deliver record net service revenue, profitability and margins, as well as continued strong cash flow conversion in fiscal 2025; the Company expects:
  • Organic NSR² growth of 5% to 8%.
  • Adjusted¹ EBITDA⁴ of between $1,180 million and $1,210 million, up 9% at the mid-point.
  • Adjusted¹ EPS of between $5.10 and $5.20, up 14% at the mid-point.
  • 30 basis points of both segment adjusted¹ operating margin³ and adjusted EBITDA margin⁵ expansion to 16.1% and 16.3%, respectively.
  • 100%+ free cash flow⁶ conversion.
• Other assumptions incorporated into fiscal 2025 guidance:
  • An average fully diluted share count of 134 million, which reflects only shares repurchased to-date.
  • An adjusted effective tax rate of approximately 24% for the full year.
• See the Regulation G Information tables at the end of this release for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

Business Segments

Americas

Revenue in the second quarter was $2.9 billion, a 5% decline from the prior year. Net service revenue² was $1.1 billion, a 6% increase from the prior year. This performance was led by growth in the design business, and included growth in both the U.S. and Canada.

Operating income increased by 15% to $217 million and on an adjusted¹ basis increased by 13% to $218 million. The adjusted operating margin on net service revenue increased by 130 basis points over the prior year to 19.4%, a new second quarter high, reflecting high-returning organic growth investments, growth in the Company's highest-margin markets, the benefits from ongoing continuous improvement initiatives, and strong execution.

Backlog in the Americas segment is at a record high, driven by strong wins in the quarter that resulted in a 1.2x book-to-burn ratio⁸.

International

Revenue in the second quarter was $875 million, a 3% decline from the prior year. Net service revenue² was $742 million, a 1% increase from the prior year. Growth was driven by the U.K. and Hong Kong, which was partially offset by a decline in Australia.

Both operating income and adjusted¹ operating income increased by 1% to $82 million. The adjusted operating margin on net service revenue increased by 10 basis points over the prior year to 11.1%, which reflected strong execution and the Company's focus on high-returning markets and opportunities across its largest geographies.

Backlog in the International segment is at a record high, driven by a 1.1x book-to-burn ratio⁸ in the quarter.

Balance Sheet and Capital Allocation Update

The Company ended the quarter with a strong balance sheet, including net leverage⁹ of 0.7x. During the quarter, the Company returned more than $110 million to shareholders through stock repurchases and dividend payments. Since the initiation of its stock repurchase program in September 2020, the Company has repurchased more than $2.3 billion of stock, which represents approximately one-third of the Company's market capitalization at the time it commenced repurchases.

Tax Rate

The effective tax rate was 23.2% in the second quarter. On an adjusted¹ basis, the effective tax rate was 25.0%. The Company continues to expect a full year adjusted tax rate of approximately 24%. The adjusted tax rate was derived by re-computing the quarterly effective tax rate on adjusted net income¹⁰. The adjusted tax expense differs from the GAAP tax expense based on the taxability or deductibility and tax rate applied to each of the adjustments.

Conference Call

AECOM is hosting a conference call tomorrow at 8 a.m. Eastern Time, during which management will make a brief presentation focusing on the Company's results, strategy and operating trends, and outlook. Interested parties can listen to the conference call and view accompanying slides via webcast at https://investors.aecom.com. The webcast will be available for replay following the call.

About AECOM

AECOM (NYSE:ACM) is the global infrastructure leader, committed to delivering a better world. As a trusted professional services firm powered by deep technical abilities, we solve our clients' complex challenges in water, environment, energy, transportation and buildings. Our teams partner with public- and private-sector clients to create innovative, sustainable and resilient solutions throughout the project lifecycle – from advisory, planning, design and engineering to program and construction management. AECOM is a Fortune 500 firm that had revenue of $16.1 billion in fiscal year 2024. Learn more at aecom.com.

Forward-Looking Statements

All statements in this communication other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including any statements of the plans, strategies and objectives for future operations, profitability, strategic value creation, capital allocation strategy including stock repurchases, risk profile and investment strategies, and any statements regarding future economic conditions or performance, and the expected financial and operational results of AECOM. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, but are not limited to, the following: our business is cyclical and vulnerable to economic downturns and client spending reductions; potential government shutdowns, changes in administration or other funding directives and circumstances that may cause governmental agencies to modify, curtail or terminate our contracts; losses under fixed-price contracts; limited control over operations that run through our joint venture entities; liability for misconduct by our employees or consultants; changes in government laws, regulations and policies, including failure to comply with laws or regulations applicable to our business; maintaining adequate surety and financial capacity; potential high leverage and inability to service our debt and guarantees; ability to continue payment of dividends; exposure to political and economic risks in different countries, including tariffs and trade policies, geopolitical events, and conflicts; inflation, currency exchange rates and interest rate fluctuations; changes in capital markets and stock market volatility; retaining and recruiting key technical and management personnel; legal claims and litigation; inadequate insurance coverage; environmental law compliance and adequate nuclear indemnification; unexpected adjustments and cancellations related to our backlog; partners and third parties who may fail to satisfy their legal obligations; managing pension costs; AECOM Capital real estate development projects; cybersecurity issues, IT outages and data privacy; risks associated with the benefits and costs of the sale of our Management Services and self-perform at-risk civil infrastructure, power construction and oil and gas businesses, including the risk that any purchase adjustments from those transactions could be unfavorable and result in any future proceeds owed to us as part of the transactions could be lower than we expect; as well as other additional risks and factors that could cause actual results to differ materially from our forward-looking statements set forth in our reports filed with the Securities and Exchange Commission. Any forward-looking statements are made as of the date hereof. We do not intend, and undertake no obligation, to update any forward-looking statement.

Non-GAAP Financial Information

This communication contains financial information calculated other than in accordance with U.S. generally accepted accounting principles ("GAAP"). The Company believes that non-GAAP financial measures such as adjusted EPS, adjusted EBITDA, adjusted net/operating income, segment adjusted operating margin, adjusted tax rate, net service revenue and free cash flow provide a meaningful perspective on its business results as the Company utilizes this information to evaluate and manage the business. We use adjusted operating income, adjusted net income, adjusted EBITDA and adjusted EPS to exclude the impact of certain items, such as amortization expense and taxes to aid investors in better understanding our core performance results. We use free cash flow to present the cash generated from operations after capital expenditures to maintain our business. We present net service revenue (NSR) to exclude pass-through subcontractor costs from revenue to provide investors with a better understanding of our operational performance. We present segment adjusted operating margin to reflect segment operating performance of our Americas and International segments, excluding AECOM Capital. We present adjusted tax rate to reflect the tax rate on adjusted earnings. We also use constant-currency growth rates where appropriate, which are calculated by conforming the current period results to the comparable period exchange rates.

Our non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. A reconciliation of these non-GAAP measures is found in the Regulation G Information tables at the back of this communication. The Company is unable to reconcile certain of its non-GAAP financial guidance and long-term financial targets due to uncertainties in these non-operating items as well as other adjustments to net income. The Company is unable to provide a reconciliation of its guidance for NSR to GAAP revenue because it is unable to predict with reasonable certainty its pass-through revenue.